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International Public Goods and the Case for Foreign Aid

  • Jayaraman, Rajshri
  • Kanbur, Ravi

In the presence of international public goods, donors are faced with two instruments whereby recipient utility may be altered -contributions towards the international public good and direct transfers (conventional foreign aid). The self-interested donor's optimal choice of transfer-contributions combinations will typically depend upon the public goods technology. Some technologies call for a corner solution, with either transfers or contributions set to zero, and others are characterised by interior solutions, where the donor's optimal strategy calls for a positive transfers and positive contributions. Whether or not the presence of an international public good strengthens the case for conventional foreign liid transfers is therefore not always obvious.

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File URL: http://purl.umn.edu/127684
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Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 127684.

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Date of creation: Mar 1999
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Handle: RePEc:ags:cudawp:127684
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  1. Neil Bruce, 1989. "Defence Expenditures by Countries in Allied and Adversarial Relationships," Working Papers 745, Queen's University, Department of Economics.
  2. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
  3. Pedersen, Karl R, 1996. " Aid, Investment and Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 423-38.
  4. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  5. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  6. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
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